Canada Still 3.5 Million Homes Short of Affordability, Says CMHC

Houses under construction in Toronto in a file photo. (Graeme Roy/The Canadian Press)

The Canada Mortgage and Housing Corporation (CMHC) projects the country will need 3.5 million new homes built within seven years to make homeownership affordable, but it also forecasts supply gaps.

Last year’s CMHC report determined the country would have a supply gap of 3,520,000, which has fallen to 3,450,000 this year., according to the updated report released Sept. 13. Ontario had a projected supply gap of 1,850,000 units last year, which has dropped to 1,480,000 this year.

Quebec, however, went from a 620,000-unit supply gap last year to 860,000 this year, while British Columbia’s grew to 610,000 from 560,000.

“For Ontario, the combination of fewer households in 2030 compared to the number estimated last year and less growth in income per household leads to less household demand, and, in turn, to a lower supply gap,” said the report.

“For Quebec, increased household numbers and increased income per household lead to higher demand, while the projection for housing supply is lowered. Result: the supply gap increases.”

Alberta’s supply gap grew from 20,000 in 2022 to 130,000 this year, owing to higher household income and a slight decline in household numbers. The province also has fewer housing starts than the other largest provinces.

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CMHC noted that the federal government’s aggressive immigration targets don’t extend beyond 2025 when Canada will welcome 500,000 immigrants, opening the door to the possibility that the number will moderate.

Prime Minister Justin Trudeau, who made a housing announcement in London on Sept. 13, was asked if he would commit to building 3.5 million homes by 2030.

Mr. Trudeau said his government would work with every stakeholder to “make sure we’re doing everything we can to build more housing quickly.”

Canada’s population is estimated to break 44 million people by 2030. While CMHC projected last year that there would be 18.6 million households in the country by 2030, that figure has decreased to 18.2 million.

“An important reason for this decline is the current shortfall in housing construction,” the report said. “Materials have gotten more expensive, labour is in short supply, and it’s hard to get financing for construction. While there’s a large reduction in the level of supply in Ontario, it’s proportionately smaller than in other large provinces.”

The Canadian construction industry is beset by problems of its own. RBC noted that the construction price index has surged by 51 percent since the pandemic started, with prices for crucial materials like concrete and structural steel increasing by 55 percent and 53 percent, respectively.

A pronounced shortage of trades workers is also hampering construction by protracting project timelines, which make them more costly.

Inflation, which rose to 3.3 percent in July, and Canada’s rapidly growing population, have put upward pressure on development charges imposed by municipal governments onto developers. In 2022, fees rose by 30 percent year-over-year for single-family and semi-detached houses.

“Given they are intended to fund the growth component of municipal capital projects, high levels of expected population growth, alongside inflation, have contributed to the rapid acceleration of these fees,” RBC said.